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Union Pacific CEO Doesn’t See Double-Dip Recession

By

John Kell

Sep 9, 2011 8:31 am ET

Union Pacific Corp. Chairman and Chief Executive Jim Young said he doesn’t expect the U.S. to fall into a double-dip recession, although relatively low growth is possible in the near term as consumers hesitate to spend.

“I don’t see a double dip, I hope not,” Young said. “But what you may see is relatively low growth going forward.”

Union Pacific, the largest public railroad in the U.S. by market capitalization, and other top railroads and freight haulers are often considered economic bellwethers because of the breadth of goods they ship.

The U.S. railroad company’s top executive said Union Pacific, in the near term, expects demand for energy to be a strong volume driver for freight, especially with strength from exports and domestic coal. He also said any goods related to food production and consumption will be a strong force.

But commodities related to consumers are a wild card, with a rebound in the auto sector still underway and weak housing fundamentals dragging on that sector.

“Inventory ratios are as low as they’ve ever been,” Young said. “Our customers are really keeping their inventories tight. So for us, if you get any kick of consumer demand, you will see a jump in production.”

Earlier this week, Dahlman Rose said all railroads were looking for a late peak shipping season. The investment firm said railroad companies continue to get pricing “well above their cost inflation, which should help them drive their operating ratios lower.”